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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
March 25, 1999
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Date of Report (Date of earliest event reported)
M-Wave, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-19944 36-3809819
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(State or other jurisdiction) (Commission) (IRS Employer
of Incorporation) File Number) identification No.)
216 Evergreen Street, Bensenville,Illinois 60106
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(Address of principal executive offices) (Zip Code)
(630) 860-9542
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(Registrant's telephone number)
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Item 2. Disposition of Assets
M~Wave, Inc., a manufacturer of microwave printed circuit boards used in
wireless communications, announced that PC Dynamics Corporation, a wholly owned
subsidiary of the Company, sold substantially all of its machinery and
equipment, inventory and accounts receivable and assigned substantially all of
its outstanding contracts and orders to Performance Interconnect Corp., a Texas
Corporation ("PIC"). The purchase price paid by PIC consisted of:
(i) $893,319 in cash;
(ii) a promissory note in the principal amount of $773,479, which
is payable in nine (9) equal monthly installments commencing
on July 1, 1999; and
(iii) a promissory note in the principal amount of $293,025, which
is payable in monthly installments of $50,000 commencing on
May 1,1999 until paid.
PC Dynamics and PIC also entered into a royalty agreement which provides for PIC
to pay PC Dynamics a royalty equal to 8.5% of the net invoice value of certain
microwave frequency components and circuit boards sold by PIC for eighteen
months following the closing. PIC shall not be required to pay PC Dynamics in
excess of $500,000 in aggregate royalty payments.
In addition, PC Dynamics has leased its facility in Texas to PIC for $17,000 per
month for three years. PIC has the right under the lease to purchase the
facility from PC Dynamics for $2,000,000 at anytime during the term of the
lease. If PIC exercises its right to purchase the facility, the remaining
balance due on the royalty agreement is payable in monthly installments of
$25,000 until a minimum of $500,000 is paid.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
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M~WAVE, Inc.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
EFFECT OF PC PRO FORMA
COMPANY DYNAMICS TO REFLECT THE
HISTORICAL CORPORATION SALE NOTE TRANSACTION
----------- ---------------- ---- --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................... $ 3,712,537 $893,319 1 (a) $ 4,605,856
Accounts receivable, net of allowance for doubtful accounts,
1997- $10,233: 1998 $10,000........................................ 1,772,637 (616,946) 1 (a) $ 1,155,691
Inventories......................................................... 1,583,421 (773,479) 1 (b) $ 809,942
Deferred income taxes............................................... 395,987 461,355
Prepaid expenses and other.......................................... 99,656 (16,651) 1 (a) $ 83,005
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Total current assets............................................ 7,564,238 7,115,849
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements.................................... 2,360,152 2,360,152
Machinery and equipment............................................. 7,355,774 7,355,774
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Total property, plant and equipment............................. 9,715,926 9,715,926
Less accumulated depreciation....................................... (4,750,872) (4,750,872)
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Property, plant and equipment-net............................... 4,965,054 4,965,054
ASSETS TO BE DISPOSED OF, NET........................................... 3,233,405 (733,405) 1 (b) $ 2,500,000
NOTES RECEIVABLE........................................................ 0 773,479 1 (b) $773,479
NOTES RECEIVABLE........................................................ 0 293,025 1 (c) $293,025
OTHER ASSETS............................................................ 5,677 5,677
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TOTAL................................................................... $15,768,374 ($180,658) $15,653,084
=========== ========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................... $ 1,306,348 $11,197 1 (a)(c) $ 1,317,545
Accrued expenses.................................................... 607,628 (92,005) 1 (a) $ 515,623
Current portion of long-term debt................................... 307,605 307,605
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Total current liabilities....................................... 2,221,581 2,140,773
DEFERRED INCOME TAXES................................................... 388,808 454,176
LONG-TERM DEBT.......................................................... 1,990,337 1,990,337
DUE TO (FROM) AFFILIATES...............................................
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000,000
shares; no shares issued..........................................
Common stock, $.01 par value; authorized, 10,000,000 shares
3,069,806 shares issued and 3,049,806 shares outstanding
at December 31, 1997, 3,069,806 shares issued and 2,267,842
shares outstanding at December 31, 1998........................... 30,698 30,698
Additional paid-in capital.......................................... 8,348,832 8,348,832
Retained earnings .................................................. 4,464,226 (99,850) 1 (d) $ 4,364,376
Treasury stock: 801,964 shares, at cost............................ (1,676,108) (1,676,108)
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Total stockholders' equity ..................................... 11,167,648 11,067,798
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TOTAL................................................................... $15,768,374 ($180,658) $15,653,084
=========== ========== ==============
</TABLE>
See notes to consolidated financial statements.
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M~WAVE, Inc.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve months ended December 31, 1998
<TABLE>
<CAPTION>
EFFECT OF PC PRO FORMA
COMPANY DYNAMICS TO REFLECT THE
HISTORICAL CORPORATION SALE NOTE TRANSACTION
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<S> <C> <C> <C> <C>
Net sales.......................................... $13,120,054 ($4,485,684) $8,634,370
Cost of goods sold................................. 10,686,614 (3,545,916) 7,140,698
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Gross profit..................................... 2,433,440 (939,768) 1,493,672
Operating expenses:
General and administrative....................... 1,635,001 (532,190) 2 (a) 1,102,811
Selling and marketing............................ 615,665 (129,212) 486,453
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Total operating expenses....................... 2,250,666 (661,402) 1,589,264
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Operating loss .................................. 182,774 (278,366) (95,592)
Other income (expense):
Interest income.................................. 171,597 52,471 2 (b) 224,068
Interest expense................................. (219,254) 0 (219,254)
Gain (loss) on disposal of assets................ 38,806 (155,685) 1 (a) (116,879)
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Total other (expense) (8,851) (103,214) (112,065)
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Profit before income taxes..................... 173,923 (381,580) (207,657)
Income taxes....................................... 155,420 (232,764) (126,671)
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Net Income......................................... $ 18,503 ($148,816) ($80,986)
=========== ================ ==============
Net Income per share $0.01 ($0.05) ($0.03)
Weighted average shares 3,019,813 3,019,813 3,019,813
</TABLE>
See notes to consolidated financial statements.
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M~WAVE, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION:
On March 25, 1999 the Company sold substantially all of the machinery and
equipment, inventory and accounts receivable of PC Dynamics Corporation, a
wholly owned subsidiary of the Company.
The accompanying pro forma balance sheet has been prepared by applying certain
pro form adjustments to historical financial information, assuming the
disposition occurred December 31, 1998.
The pro forma consolidated statement of operations for the year ended December
31, 1998 has been prepared based upon certain pro forma adjustments to
historical financial information, assuming the disposition occurred on January
1, 1998.
The pro forma data is not necessarily indicative of the operating results or
financial position that would have occurred had the transaction described above
been consummated at the dates indicated, nor necessarily indicative of future
results or financial position.
Basic income per share of common stock is calculated by dividing net income by
the weighted average number of common shares outstanding during the year.
B. PC DYNAMICS CORPORATION EFFECT OF SALE
(1) Reflects the Company's financial position as of December 31, 1998 in
the balance sheet in addition to the following adjustments:
(a) The sale of machinery and equipment and net working capital for
cash of $893,319.
(b) A promissory note in the principal amount of $773,479 in exchange
for the inventory.
(c) A promissory note in the principal amount of $293,025 in exchange
for the Accounts Payable.
(d) Adjustments of certain assets and liabilities for a net loss of
$99,850.
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(2) Reflects the elimination of PC Dynamics Corporation's results of
operations for the period ended December 31, 1998 and the following
adjustments:
(a) Includes $100,000 of estimated severance costs
(b) Interest income on the new promissory notes
(c) Royalty income which is equal to 8.5% of the net invoice value of
certain microwave frequency components and circuit boards sold by
the purchaser in the next eighteen months, with a maximum amount
of $500,000 which is reflected as recovery of land and building
costs until sold.
(c) Lease payments of $17,000 per month. Proceeds of the lease are
treated as recovery of the carrying value of the land and
building.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
M~Wave, Inc.
Dated: April 13, 1999 /s/ Paul H. Schmitt
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Paul H. Schmitt
Treasurer and Secretary
(Principal Accounting and
Financial Officer)
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